Beyond the Price Tag:
Unveiling the Hidden Costs of buying a property

UrbanVault team • 2 August 2023
Buying property in Malaysia requires significant upfront cash preparation. Many assume the 10% deposit is all, but there are other fees before receiving keys. Unprepared buyers get caught off guard, impacting their budget. Shedding light on these fees helps new home buyers plan ahead effectively, ensuring a better understanding of what to expect financially.
Here's a summary of the upfront costs:
  • 10% of property value
Sales and Purchase Agreement (SPA)
  • Legal fees from 1% to 1.25% of property value
  • Stamp duty of RM 10 per copy
  • Legal disbursement fees
Loan Agreement
  • Legal fees from 1% to 1.25% of loan amount
  • Stamp duty of 0.5% of loan amount
  • Legal disbursement fees
Memorandum of Transfer (MoT)
  • Stamp duty based on property value
  • Valuation fee based on property value
  • Disbursement fees
Agent Fees
  • Usually less than 3% of property value

1: Deposit

The deposit refers to the amount that the buyer has to pay to ‘secure’ the property. During the homebuying process, the buyer will have to pay 10% as a down payment of the property price. Of the 10% deposit, 1-3% is typically paid to the seller upon submitting an offer to indicate the buyer’s sincerity in purchasing the property. The earnest deposit also blocks the property from being purchased by another party during the usual “lock in” period of 14 days while the buyer secures financing.

The remaining 7-9% of the deposit is paid once the SPA has been signed.

2: Sales and Purchase Agreement (SPA)

The sales and purchase agreement, sometimes called the SNP/S&P agreement, is an agreement between the seller and the buyer. It is important for both parties to engage lawyers who will prepare and review the agreement to ensure it is valid and effective.For some newly launched projects (developer units), property developers will pay for any fees associated with the SPA as part of their sales packages.

However, typically the buyer is responsible for covering fees associated with the sales and purchase agreement. The relevant fees, listed below, include legal fees and stamp duty.

A significant component of the legal fees will be based on the property value - the more expensive the property, the more expensive the fee. Buyers should engage the services of a lawyer to handle the legal aspects of the sales and purchase agreement.

Legal Fee (% of Property Value)Price Tier
1.25%First RM 500,000
1%Next RM 7 million
<=1% (Subject to negotiation)Property value exceeding RM 7.5 million

Note that the legal fee based on property value is subject to a minimum of RM 500. The amount after the minimum is applied is then subject to a 6% sales and services tax.

These fees cover various expenses such as registration fees, search fees, and courier charges. The specific amount of these disbursement fees can vary depending on factors such as the complexity of the transaction, the property’s value, and the legal service provider’s rates.

Stamp Duty

Stamp duty is a tax imposed on certain property documents in Malaysia. When it comes to the Sales and Purchase Agreement (SPA), the stamp duty is relatively low at RM10 per copy.

3: Loan Agreement

The loan agreement is a contract that is entered into between the bank and the buyer. Typically, the bank’s lawyer will be responsible for drafting the loan agreement. In most cases, the legal fee incorporates disbursement and stamp duty fees. However, it is advisable to inquire with the bank whether the legal, disbursement and stamp duty fees are included in the loan amount. Some banks include the fees within the financial loan amount.

The legal fee rates for loan agreement are listed below:

Legal Fee (% of Loan Amount)Price Tier
1.25%First RM 500,000
1%Next RM 7 million
<=1% (Subject to negotiation)Loan amount exceeding RM 7.5 million

Note that the legal fee based on loan amount is subject to a minimum of RM 500. The amount after the minimum is applied is then subject to a 6% sales and services tax.

Other fees may apply when preparing for the bank loan agreement, such as stamping on the Statutory Declaration and Affirmation, stamping on the Letter Offer, registration charge annexure, registration fees for Entry and Withdrawal of Private Caveat, a registration fee of consent to charge, winding up and bankruptcy search, land search, bank purchase document, travelling and courier services, photocopying, printing, faxing, and so on.

All of these modest costs are bundled together and referred to as the disbursement fee. In general, disbursement fees cost between RM1,500 and RM2,000 in total but can be lower or higher depending on the law firm.

Stamp Duty

Indeed, stamp duty is also applicable to loan agreements, but its imposition is limited to a maximum rate of 0.5% of the total value of the loan.

FYI, if you’re buying a home for the first time, you can enjoy a complete waiver of stamp duty on the loan agreement for residential properties priced up to RM500,000. Meanwhile, for residential properties priced between RM 500,000 to RM 1 million, buyers will enjoy a 75% discount on the loan agreement stamp duty. This beneficial opportunity is part of the Keluarga Malaysia Home Ownership Initiative (i-MILIKI) programme which was introduced in July 2022. The exemption applies to sales and purchase agreements finalised between 1 June 2022, and 31 December 2023.

4: Memorandum of Transfer/ Deed of Assignment

The Memorandum of Transfer (MoT) is a legally binding document that serves as evidence of the transfer of property ownership from the seller to the buyer.

Similarly, the Deed of Assignment (DoA) is commonly used in scenarios where a property is sold before the land title is granted for high rise residential units. This document is particularly relevant when dealing with properties developed by a real estate developer. The DoA allows for the transfer of ownership to take place once the developer obtains the title, at which point the buyer can proceed with the transfer of the title through the execution of the MoT.

In this stage, homebuyers are required to pay stamp duty upon the transfer of the deed. This stamp duty, whether for Memorandum of Transfer (MoT) or Deed of Assignment (DoA), needs to be settled when the property deeds are officially transferred to the buyer’s name.

Similar to the loan agreement, the stamp duty on MoT and DoA will be exempt for homebuyers for SPAs finalised before 31 December 2023.

The fees for MoT/DoA stamp duty are listed below:

Rate (% of Property Value)Price Tier
1%First RM 100,000
2%Next RM 400,000
3%Next RM 500,000
4%Property value exceeding RM 1 million

5: Valuation

Valuation is a process of evaluating the market value of a property in its current condition. This usually will happen before getting a loan and it is different from negotiating the price with the seller. It will be carried out by authorised firms and their representatives (banks and panel valuation experts). In other words, valuation is for bankers to have confidence in the property and how much money they are willing to lend to the buyer.

In some cases, however, the valuation fee will be incorporated into the loan amount, and the bank will disburse this fee to the appointed valuer.

Valuation Fees Based on Property Value

According to the Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVAEP), the valuation fees are as below:

Fees (% of Market Price)Price Tier
0.25%On the first RM 100,000
0.2%Next RM 1.9 million
0.167%Next RM 5 million
0.125%Next RM 8 million
0.1%Next RM 35 million
0.067%Next RM 150 million
0.05%Next RM 300 million
0.04%Property value exceeding RM 500 million

Note that these fees are subject to a minimum of RM 400. The amount after the minimum is applied is then subject to a 6% sales and services tax.

Disbursement Fees

Disbursement fees in the valuation stage which included cost of printing, plans, copies of documents, lithography, travelling, labour and other expenses actually incurred. The specific costs associated with these disbursements may vary for each situation, as they depend on the complexity and requirements of the valuation process.

6: Agency Fees

You might be curious about why agency fees fall on the buyer rather than the seller. In the home buying process, two types of agents are typically involved: the seller agent and the buyer agent. The seller agent will represent the seller’s best interests, while the buyer agent advocates for the buyer. Thus, the fees are structured accordingly to ensure each party’s representation and protection throughout the transaction.

When it comes to agents helping out with buying a property, they will usually charge a commission for introducing the property, arranging for viewing the property, and others. According to the Malaysian Institute of Estate Agents (MIEA), if you’re buying or selling land and buildings in Malaysia, the agent’s commission will be less than 3% of the property’s sale price. Typically, you’ll need to pay up this commission when you sign the SPA (Sales and Purchase Agreement). Note that the agency fee is subject to a 6% sales and services tax.

If you did not engage a buyer’s agent, the seller will cover all agency fees so don’t sweat it!

It is important to keep in mind that these upfront payments must be made prior to receiving a loan from the bank. Being aware of this beforehand can prove highly beneficial, helping you avoid any potential financial difficulties or straying from your budget.

The Home Loan Calculator + hidden costs created by UrbanVault will aid the calculation of your budget, enabling you to plan better for your future home.

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**This post serves as a general guide for budgeting your property purchase, but it is important to note that specific circumstances can vary. It is highly recommended that you conduct your own research and seek advice from a professional to address any specific questions you may have.

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